BEIJING, June 7 (Xinhua) -- China and Costa Rica announced on Thursday that they had agreed to establish diplomatic ties after the Latin American country agreed to break official relations with Taiwan.

Chinese experts believe the move may start a "domino effect" of Latin American countries officially recognizing over Taiwan as Chinese territory.

A joint communique, signed on June 1 by Chinese Foreign Minister Yang Jiechi and his Costa Rican counterpart Bruno Stagno Ugarte, says the two governments, "in accordance with the interests and aspirations of the peoples of the two countries, agree to establish diplomatic ties at ambassadorial level beginning June 1, 2007."

"The Costa Rican government recognizes that there is only one China and the government of the People's Republic of China is the sole legitimate government representing the whole China. Taiwan is an inalienable part of the Chinese territory," it says.

Costa Rica established diplomatic relations with the then Chinese government ruled by the Kuomintang party in 1941. In 1949 the Kuomintang authorities moved to Taiwan and the People's Republic of China was founded.

"For Costa Rica this is an act of foreign policy realism that promotes links to Asia," said Costa Rican President Oscar Arias. "It is my responsibility to recognize a global player as important as the People's Republic of China."

Arias, who received the Nobel Peace Prize in 1987 for his efforts to end civil wars then in Central American countries, said his decision was based on the deep trade relationship between the two nations.

The Costa Rican government considers it essential to form a link with China, the world's largest emerging economy, Arias said.

Twenty-four states recognize Taiwan, mostly small nations in the Americas, Africa and the South Pacific, including the Solomon Islands, Nicaragua, Panama and Burkina Faso.

The Costa Rican move could influence other nations in central America and the rest of Latin America that maintain relations with Taiwan, said Xu Shicheng, a Latin America expert with the Chinese Academy of Social Sciences.

"The establishment of formal diplomatic ties between China and Costa Rica will probably bring about a domino effect," said Xu.

Latin American countries will gradually realize China's fast growth and recognize that friendly relations with China are the predominant policy in the international community, Xu said.

Last month, the Taiwan authorities announced they had resumed "diplomatic relations" with the Caribbean island nation of St. Lucia, with which China established diplomatic links in 1997.

Chinese officials have maintained that the Taiwan authorities' attempts to pursue "money diplomacy" and create "two Chinas" or "one China, one Taiwan" would not succeed.

With a population of 4.16 million and GDP exceeding 18 billion U.S. dollars, Costa Rica is a significant nation in Central America, Xu said, adding the country had "significant influence" on other Latin American countries.

"More Latin American countries such as Nicaragua and Panama will reconsider their relationships with China," Xu said.

Official figures show soaring trade between the China and Costa Rica. Bilateral trade reached 2.156 billion U.S. dollars in 2006, an increase of 87.3 percent over that in 2005. Costa Rica's exports to China were valued 558 million U.S. dollars in 2006, a year-on-year rise of 132 percent.

According to the communique, the Chinese and Costa Rican governments agree to "develop friendly cooperation".

The two countries have agreed to exchange ambassadors and assist in the establishment and operation of each other's embassies on an equal footing, it says.

Costa Rica is the 169th country to establish diplomatic relations with China.